Costa Rica News - Jun 12, 2005

Know What A Perito Is?

For those not native to Costa Rica it is not a dog but an inspector. Banks and other lending institutions usually do not trust their own in house employees to do valuations so they hire outside "peritos" to value any hard assets from real estate to diamonds to cars etc. before they will make loans.

The most common job of a perito in Costa Rica is valuation of property and it takes not only the eye of an engineer but also that of an architect and real estate agent rolled into one person to create the most informed valuations.

For an existing house the perito will take the land value per square meter and the square meter house values less the official College of Engineers and Architects depreciation schedule based on the type of construction and age. Where the real art of appraisal comes into play is the so called 'L curve' that most lenders use here.

Personality of the Year

The former president of the Central Bank of Costa Rica (BCCR) Eduardo Lizano was bestowed with the Personality of the Year 2005 award of the by The Financial Times. This is an acknowledgement to Dr. Lizano's contribution to making the economy of Costa Rica attractive to foreign investors.

According to the June-July 2005 issue, Lizano's successful economic policies made Costa Rica one of the most attractive Latin American destinations for direct foreign investment. "It seems to me very interesting that they have bestowed such an award to someone from a small country, such as ours," Lizano said. What's important is that this is an acknowledgment for Costa Rica, rather than for one person," he added.

Dr. Lizano headed the Central Bank for three terms and his writings are, in many cases, the basis for national economic analysis.

Interest Rates Lowered, Banks to Increase Their Reserves

The Banco Central de Costa Rica (BCCR) - the central bank - announced changes that can reduces interest rates paid to depositors and at the same time offer depositors more security of their banking institution, forcing banks to increase their reserves to 15% for the current 12%.

As of yesterday, the "básica pasiva" - the interest rate paid on deposits was reduced to 14% from 14.5% on colones accounts. The interest rate on US Dollar accounts is not affected.

The central bank is giving banks until August of this year to increase the amount of reserves from the current 12% to 15%. Banks have to maintain that amount based on their intake and monitored by the Central Bank's superintendent.

Banks who fall below the required 15% will need to shore up their reserves or face government action. Several private banks fell below the minimum reserves of the past couple of years and since disappeared. The latest is the case of Banco Elca, which is in the process of being liquidated.

Carlos Fernández, General Manager of the Banco de Costa Rica (BCR) says the change will mean that the BCR will need to maintain an additional ¢23 billion colones on which it will not be earning any interest. The change is expected to increase the Central Bank's reserves by us$120 million dollars. The change will not only force the banks, both private and state, to tie up more cash, it will affect customers as well, who will receive less interest on deposit and pay more on loans. The changes in interest will be set by the banks once they adjust their reserves.

Speedy Internet Celebrated

Costa Rica just might be pulling into the fast lane on the information superhighway, thanks to developments this week that have observers making big plans for the country's online future.

On Monday night, the long-awaited Advanced Internet Network - originally slated to begin operation three years ago - was inaugurated at the Melico Salazar Theater in downtown San José, at the launch of a two-day Latin American Internet conference.

The same day, a few blocks away, the similarly long- anticipated Law of Electronic Certificates, Signatures and Documents was approved in first debate 40-2 in the Legislative Assembly. The latter means people may soon be able to conduct myriad business and government transactions online, while the former promises a nationwide high-speed Internet network incorporating more Costa Ricans into the digital age than ever before.

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